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Lacima Sees LNG as a Major Risk Management Opportunity

Lacima is having a pretty good year and sees plenty of opportunities in the market for its brand of energy risk analytics, says CEO, Dr. Chris Strickland. It also recently hired a new Director of Sales, he told me, and is hoping to continue to grow its business globally. Lacima is a specialist provider of software and services dedicated to trading, valuation, optimisation and risk management for the global energy and commodities markets. Its focus is on helping to maximise profit potential and allow more informed decisions by providing tools that yield more accurate valuations, hedging analysis and risk exposure analysis for portfolios of complex financial contracts and physical assets. It was founded by two veteran risk experts in Dr. Strickland and Dr. Clewlow who literally wrote the book on energy risk.

We have seen quite a lot of success recently in the LNG space,” he said. “The LNG market is going more towards structured deals with embedded optionality and with the cost of shipping where it’s at, it’s also more focused on shipping optimization. Both areas suit us very well.” Lacima has all the tools to handle these needs as it is essentially what the company does, and all those tools apply equally well to LNG. “With the mtpa implied by multi-year strips of cargoes, understanding the quantum of the embedded flex value and optimizing the shipping can have a large impact on the profitability of a transaction.”

Another area Chris sees a lot of interest and demand is in and around VaR. “Value-at-risk has been around for decades and most CTRM’s will do a basic VaR calculation and some even do more exotic VaR calculations,” he told me. “The problem is that when there is a sudden movement in VaR and the risk manager company tries to explain the changes, the CTRM tends to fall short and so we get called in. Our tools allow the user to ask the key questions and get answers like how it changed, and why even when they have 300+ price curves and 100k+ deals or more in their portfolio. It’s these insights that come from our software that help inform and drive the business.

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These days, ComTech sees risk management and, more advanced risk analytics, as gaining in importance for commodity firms as key stakeholders and regulators desire more transparency into this area of the business to ensure that adequate controls are in place. This bodes well for risk specialist vendors like Lacima who appear well positioned to offer the tools and expertise that the industry needs.